Oil Prices Decline As Tariff Uncertainty Keeps Investors On Edge

Singapore: Oil prices dropped on Monday due to worries regarding the effect of U.S. import tariffs on global economic growth and fuel consumption. Increased production from OPEC+ members dampened investor enthusiasm for riskier assets. Brent crude dropped 31 cents, or 0.4 per cent, to $70.05 a barrel by 0445 GMT after closing up 90 cents on Friday. U.S. West Texas Intermediate crude stood at $66.69 per barrel, decreasing by 35 cents, or 0.5 per cent, after finishing 68 cents up in the last trading session, per a Reuters report.

WTI fell for a seventh straight week, marking the longest losing sequence since November 2023, while Brent dipped for a third week after U.S. President Donald Trump enacted and then postponed tariffs on essential oil providers Canada and Mexico, in addition to increasing taxes on Chinese products. China responded to the U.S. and Canada by imposing tariffs on agricultural goods. According to ING analysts, in a report, "uncertainty regarding tariffs is a major factor contributing to the weakness, with additional negative sentiment due to Saudi Arabia's oil price reductions and deflationary trends from China."

Oil prices drop on tariffs

IG analyst Tony Sycamore noted that additional elements affecting oil prices are worries regarding U.S. economic growth, the possibility of U.S. sanctions on Russia being lifted, and OPEC+ deciding to raise output. "However, since much of the negative news is likely already priced in, we anticipate that weekly support levels near $65/$62 will remain strong before a bounce back to $72.00," he noted in a message to clients about the WTI price. Oil prices regained some losses on Friday after Trump stated that the U.S. would enhance sanctions on Russia if it does not achieve a ceasefire with Ukraine. 

According to two individuals acquainted with the situation, the U.S. is exploring options to relax sanctions on Russia's energy industry if Russia consents to conclude its conflict with Ukraine, Reuters reported. In the meantime, the Organization of the Petroleum Exporting Countries and its partners, including Russia, collectively referred to as OPEC+, announced that it will continue to increase oil production starting in April. On Friday, Russia's Deputy Prime Minister, Alexander Novak, stated that OPEC+ might reconsider the decision if there is a market imbalance. In addition to supply worries, Saudi Arabia reduced prices for its crude grades sold to Asia for the first time in three months in April.

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Last week, Trump expressed a desire to strike a deal with OPEC member Iran to stop it from pursuing nuclear weapons – despite Iran's claims that it is not pursuing these weapons. Trump is implementing a "maximum pressure" strategy against Iran, during which the U.S. on Saturday revoked a waiver enabling Iraq to compensate Iran for electricity, according to a State Department spokesperson. On Saturday, Iran's Supreme Leader Ayatollah Ali Khamenei stated that his nation will not be coerced into talks.